NEW YORK (REUTERS, BLOOMBERG) - The S&P 500 closed at its highest level of the year on Wednesday (March 16) after the US Federal Reserve left interest rates untouched and signaled fewer rate hikes in coming months.
The Fed indicated moderate US economic growth and "strong job gains" would allow it to tighten policy this year with fresh projections showing policymakers expected two quarter-point hikes by the year's end, half the number seen in December.
But the US central bank noted the United States continues to face risks from an uncertain global economy.
Because of that uncertainty, "the committee judged it prudent to maintain the current policy stance at this meeting,"Fed Chair Janet Yellen said.
The Fed also cut its GDP growth outlook for 2016 from 2.4 per cent to 2.2 per cent and reduced 2017's call from 2.2 per cent to 2.1 per cent.
The decision to keep rates steady was in line with analyst predictions, but the Fed's tone was surprising to some.
"Most folks were looking for a slightly hawkish statement and they did not deliver in that," said Tom Porcelli, RBC Capital Markets chief U.S. economist. "It was balanced at best and probably even slightly dovish."
The Dow Jones industrial average closed up 74.23 points, or 0.43 per cent, to 17,325.76, the S&P 500 had gained 11.29 points, or 0.56 per cent, to 2,027.22 and the Nasdaq Composite had added 35.30 points, or 0.75 per cent, to 4,763.97.
The CBOE volatility index a gauge of what equity investors are willing to pay for protection against a drop on the S&P 500, closed at its lowest since early December.
The US dollar declined the most in one month as the central bank also cited the potential impact from weaker global growth and financial-market turmoil on the US economy.
The Bloomberg Dollar Spot Index, which tracks the US currency versus 10 peers, fell 1.1 per cent to 1,196.31 at 5 pm in New York. The greenback lost 1 pe rcent to $1.1224 per euro and weakened 0.6 per cent to 112.56 yen.
The dollar index has weakened almost 3 per cent this year, paring a 9 per cent gain in 2015 and an 11 per cent rally the year before.